MARKET INDICES

FM-3102

Submitted by:
Jubin Dutta
3RD SEMESTER
Roll No: 36
Section-A
DBA-SMS
Assam University
Silchar
 CONTENTS

CHAPTER 1

EXECUTIVE SUMMARY

CHAPTER 2

INTRODUCTION

a) Index
b) Stock market indices
c) Market indices of Indian Stock Market
d) Market indices of Indian Stock Market
e) Bombay stock exchange and sensex
f) Sensex
g) National stock exchange and nifty
 EXECUTIVE SUMMARY

OBJECTIVE OF THE STUDY

To analyze and study the Market Indices, types of indices

RESEARCH METHODOGY
The research methodology adopted here is descriptive.

LIMITATIONS OF THE STUDY

Only Indian Stock Indices have been taken into consideration.

DATA COLLECTION
Data collected is secondary in nature.

REFERENCES
1) Financial Institutions and Markets by L.M Bhole and J.
Mahakud
2) The Indian Financial System- By Bharti . V. Pathak
3) Google
 INTRODUCTION

INDEX
An Index is used to give information about the price movements
of products in the financial, commodities or any other markets.
A numerical scale used to compare variables with one another or
with some reference number. Indices often serve as barometers
for a given market or industry and benchmarks against which
financial or economic performance is measured.
STOCK MARKET INDICES:

Financial indexes are constructed to measure price movements of

stocks, bonds, T-bills and other forms of investments. Stock
market indexes are meant to capture the overall behaviour of
equity markets. A stock market index is created by selecting a
group of stocks that are representative of the whole market or a
specified sector or segment of the market. An Index is calculated
with reference to a base period and a base index value.

Stock market indexes are useful for a variety of reasons. Some of

them are :

 They provide a historical comparison of returns on money

invested in the stock market against other forms of
investments such as gold or debt.
 They can be used as a standard against which to compare
the performance of an equity fund.
 It is a lead indicator of the performance of the overall
economy or a sector of the economy
 Stock indexes reflect highly up to date information
 Modern financial applications such as Index Funds, Index
Futures, Index Options play an important role in financial
investments and risk management
 The major market indices are tools designed to help investors
measure the overall performance of the broad stock market. By
comparing current performance with previous market history,
investors can determine when to buy and sell securities. Market
indices also function as benchmarks against which investors can
evaluate the performance of their own portfolios.
The general movement of the stock
market is typically measured by the indices representing the
entire market or important segments thereof. Most of the stock
market indices used in practice are of three types:-
a) Price-weighted Index: An index reflecting the sum of the
prices of the sample shares in a certain year (a month or
week or day) with reference to a base year. The price-
weighted assumes that the investor buys one share of each
stock included in the index.
b) Equal-weighted Index: An Index reflecting the simple
arithmetic average of the price relatives of the sample shares
in a certain year (a month or week or day) with reference to
a base year. An equal-weighted index assumes that the
investor invests an equal amount of money in each stock
included in the index.
c) Value-weighted Index: An Index reflecting the aggregate
market capitalisation of the sample shares in a certain year
(a month or week or day) in relation to a base year. A value-
weighted index assumes that an investor allocates money
across various stocks included in the index in such a way
that the weights assigned to various stocks are proportional
to their market capitalisation.
To illustrate the nature of these three
types of indices, consider the data for a sample of five shares
for two years, the base year and the year t, given in the
exhibit below:-
Shar Price in Price in Price No. Of Market Market
e Base year t Relativ Outstanding Capitalisa Capitalisati
Year (₹) (₹) e shares tion in the on in the
(in min) Base year t
Year(₹ in (₹ in min)
min) (1x4) (2x4)
1 2 3 4 5 6
A 50 70 140 10 500 700

B 40 50 125 20 800 1000

C 100 90 90 5 500 450

D 20 80 400 15 300 1200

E 15 24 160 50 750 1200

SUM 225 314 915 2850 4550

Based on the above figures of the table, and assuming that the
base year is 100, the index values for the year t for the different
types of indices are as follows:-
1) Price-weighted Index- 314/225*100=140.
2) Equal-weighted Index- 915/500*100=183.
3) Value-weighted Index-4550/2850*100=160.
 MARKET INDICES OF INDIAN STOCK MARKET:

The main Market Indices of the Indian stock Market include:

1. Sensex (Sensitivity Index) of Bombay Stock Exchange,
2. Nifty of National Stock Exchange.

BOMBAY STOCK EXCHANGE AND SENSEX:

BOMBAY STOCK EXCHANGE:

Bombay Stock Exchange is the oldest stock exchange in Asia
What is now popularly known as the BSE was established as "The
Native Share & Stock Brokers' Association" in 1875.

Over the past 135 years, BSE has facilitated the growth of the
Indian corporate sector by providing it with an efficient capital
raising platform.

Today, BSE is the world's number 1 exchange in the world in

terms of the number of listed companies (over 4900). It is the
world's 5th most active in terms of number of transactions
handled through its electronic trading system. And it is in the top
ten of global exchanges in terms of the market capitalization of its
listed companies (as of December 31, 2009). The companies listed
on BSE command a total market capitalization of USD Trillion
1.28 as of Feb, 2010.
BSE is the first exchange in India and the second in the world to
obtain an ISO 9001:2000 certification. It is also the first Exchange
in the country and second in the world to receive Information
Security Management System Standard BS 7799-2-2002
certification for its BSE On-Line trading System (BOLT).
Presently, we are ISO 27001:2005 certified, which is a ISO
version of BS 7799 for Information Security. 

The BSE Index, SENSEX, is India's first and most popular Stock
Market benchmark index. Exchange traded funds (ETF) on
SENSEX, are listed on BSE and in Hong Kong. Futures and
options on the index are also traded at BSE. 

At present there are 21 Indices maintained by BSE. They include:

No. Name of the Index Type of index

1 SENSEX Benchmark index of Indian Capital

market comprising of 30 scrips

2 BSE-100 Broad-based index comprising of 100

3 BSE-200
4 BSE-500
5 Dollex-30
scrips
Broad-based index comprising of 200
scrips
Broad-based index comprising of 500
scrips
Dollar linked version of sensex

6 Dollex-100 Dollar linked version of BSE-100

index
7 Dollex-200 Dollar linked version of BSE-200
index
8 BSE Mid-Cap Index tracks scrips that are
categorised as mid-cap as per the
criteria decided by BSE
9 BSE Small-Cap Index tracks scrips that are
categorised as small-cap as per the
criteria decided by BSE
10 BSE PSU Index tracks public sector
undertaking listed at BSE where
central Govt. holds 51% or more
shares of the company calculated on
full market capitalisation method.
11 BSE Auto Index tracks companies classified
under auto sector in BSE-500 index
12 BSE Bankex Index tracks companies classified
under banking sector in BSE-500
index
13 BSE Capital Goods Index tracks companies classified
under capita goods sector in BSE-
500 index
14 BSE Consumer Index tracks companies classified
Durables under Consumer Durables sector in
BSE-500 index
15 BSE FMCG Index tracks companies classified
under FMCG sector in BSE-500
index
16 BSE Healthcare Index tracks companies classified
under healthcare sector in BSE-500
index
17 BSE Information Index tracks companies classified
Technology under Information Technology
sector in BSE-500 index
18 BSE Metal Index tracks companies classified
under metal sector in BSE-500 index
19 BSE Oil and Gas Index tracks companies classified
under oil and gas sector in
BSE-500 index
20 BSE Realty Index tracks companies classified
under realty sector in BSE-500 index
21 BSE Teck Index tracks companies classified
under Information Technology,
telecom and media sectors in BSE-
500 index

SENSEX
It is the most widely followed stock market index in India. The
Bombay Stock Exchange Sensitivity Index, popularly called the
Sensex, reflects the movement of 30 sensitive shares from
specified and non-specified groups. The index for any trading day
reflects the aggregate market value of the 30 shares on that day in
relation to the average aggregate market value of these shares.
This means that it is a value-weighted index.
From September 2003, Sensex is being
constructed on the basis of free float market cap, rather than full
market cap.

NATIONAL STOCK EXCHANGE AND NIFTY

Inaugurated in 1994, the National Stock Exchange seeks to:
1) Establish a Nation-wide trading facility for equities, debt,
and hybrids,
2) Facilitate equal access to investors across the country,
3) Impart fairness, efficiency and transperancy to securities,
4) Shorten settlement cycle, and
 5) Meet international securities market standards.
The National Stock Exchange (NSE) is India's leading stock
exchange covering various cities and towns across the country.
NSE was set up by leading institutions to provide a modern, fully
automated screen-based trading system with national reach. The
Exchange has brought about unparalleled transparency, speed &
efficiency, safety and market integrity. It has set up facilities that
serve as a model for the securities industry in terms of systems,
practices and procedures. 

NSE has played a catalytic role in reforming the Indian securities

market in terms of microstructure, market practices and trading
volumes. The market today uses state-of-art information
technology to provide an efficient and transparent trading,
clearing and settlement mechanism, and has witnessed several
innovations in products & services viz. demutualisation of stock
exchange governance, screen based trading, compression of
settlement cycles, dematerialisation and electronic transfer of
securities, securities lending and borrowing, professionalisation of
trading members, fine-tuned risk management systems,
emergence of clearing corporations to assume counterparty risks,
market of debt and derivative instruments and intensive use of
information technology.
 REFERENCES

 Pathak V. Bharati “The Indian Financial System, Markets,

Institutions and Services”.

 Bhole LM and Mahakud Jitendra “Financial Institutions

and Markets, Structure, Growth and Innovations”.

 www.google.co.in

 www.wikipedia.org